Hedge fund manager and billionaire John Paulson said he sees gold prices moving in a range of $2,400 to $4,000 an ounce, citing double-digit inflation emerging by 2012.
Paulson, speaking at New York's University Club recently, said 80 percent of his assets are held in gold.
He added that the coming inflation will result in gold prices being pushed up even more.
Paulson also said the inevitable quantitative easing by the Federal Reserve could extend double-digit inflation out for serveral years.
It's possible it could be even more than that depending on the economy and the political pressure to interfere with it, which would result in even more stimulus. That would add to the desirability and value of gold.
Wednesday, September 29, 2010
Hedge fund manager and billionaire John Paulson said he sees gold prices moving in a range of $2,400 to $4,000 an ounce, citing double-digit inflation emerging by 2012.
Quantitative easing by the Federal Reserve is a surety, and in response, an increasing number of call options being taken on SPDR Gold Trust (NYSEArca:GLD).
While it's not certain the exact way the Fed will acquire Treasury bonds, it doesn't matter, as the result will be the same: the debasing of the American dollar, which will drive up the price of gold.
There are many other reasons gold is going up, but among traders, quantitative easing is one that can give fast rise to the price of the yellow metal, while most other gold supports offer steady increase in the price of gold over a period of time.
SPDR has whetted the appetite of traders even more when they made a killing when it went from $123 to $126, and now they're positioned to take advantage of what appears to be another nice move up, as gold continues to shatter records on a consistent basis, with nothing in the short term to stop the rise.
There of course could be a temporary correction, but in general, the price of gold will continue to rise, and options will be taken out on the more predictable companies like SPDR.
The Gold Trust closed Tuesday at $127.85, up $1.23, or 0.89 percent.
SPDR increased it bullion holdings from 5.17 metric tons to 1,305.69 metric tons as of September 28.
Newmont Mining (NYSE:NEM) was downgraded from "Buy" to "Hold" by Stifel Nicolaus, as concerns over the lower production at the Boddington mine in Australia by analyst Heather Douglas was the reason for the downgrade.
Valuations seem to be too high after the approximate 30 percent increase in share price this year, and with Boddington not producing at levels it was expected to, expectations are it could drop in price.
Douglas consequently removed her $80 price target on the giant gold miner as well.
As the company moves toward full production at Boddington, the grade of ore has been lower than anticipated, and that could dramatically affect guidance and revenue if that doesn't change.
In the first half of 2009, through the end of June, Boddington brought in just under $500 million in combined gold and copper sales.
The market largely shook off the downgrade, with Newmont closing at $64.23, gaining $1.58, or 2.52 percent.
Shares of Ivanhoe Mines Ltd. (NYSE:IVN) soared after they announced the discovery of a mineralized zone of gold and copper 1 kilometre long at its prolific Oyu Tolgoi project in Mongolia.
Consequently, the original estimates of copper and gold could be much larger than thought.
"To intercept almost one kilometre of copper and gold mineralization in a new drill hole is a remarkable development," Executive Chairman Robert Friedland said in a statement.
If this is close to the norm in the mine, the value of it could be astronomical, although that of course has to be proven.
Either way, Ivanhoe and partner Rio Tinto (NYSE:RTP) are sitting on billions worth of minerals.
Production will begin on the mine in the latter part of 2012.
Ivanhoe closed at $24.25 in New York, gaining $1.23, or 5.30 percent.
Tuesday, September 28, 2010
Gold prices today surged to another record high, as gold futures for December delivery increased by $10.20 to $1,308.80 an ounce in early trading. That breaks last weeks record of $1,302.30 an ounce
At 1:00 PM EDT, spot gold had risen $14.80 to $1,309.40 an ounce, also a record.
While gold usually moves up on economic bad news, when it retains support in the face of good economic news, you know it has legs, and that continues to be the case.
The numerous fundamentals remain in place for the economy, inflation, safety, protecting assets, weak U.S. dollar, debt, low interest rates, quantitative easing, and the sovereign debt crisis in Europe, which encourage the upward move of gold.
Not one of those are going to be changing any time soon, and in some cases, if not all, will continue to get worse, other than interest rates, which are about as low as they can go.
Enjoy the ongoing gold bull market. Until there is real economic recovery, lowered debt and higher interest rates, nothing is going to change this.
Monday, September 27, 2010
The largest gold mine in the world, Barrick Gold (NYSE:ABX), said it sees gold prices in 2011 "easily" surpassing $1,500 an ounce.
Barrick CFO Jamie Sokalsky cites the underlying supports which should ensure gold continues to rise, as the reason for his optimism.
Those supports include the European sovereign debt crisis which won't go away, geopolitical circumstances, macroeconomic issues, and supply and demand.
Taken together, Sokalsky is right, there is nothing to justify believing those issues are going to go away any time soon, and that guarantees the price of gold will continue to go up until it does.
Although Sokalsky didn't point to it specifically, the expected near-future quantitative easing by the Federal Reserve will be another part of the support foundation for gold.
At the London Bullion Market Association meeting, on average those attending believe gold prices will stand at over $1,400 at the same time next year.
As for how Sokalsky likes that potential in reference to Barrick, he sees them positioned strongly to move up with the price increase of gold, saying the elimination of hedges and prices locked in of future production concerning forward sales is good news for the company and shareholders.
Even though cash costs estimates will probably be at the top end because of royalties related to the increase in gold prices, that also will help increase margins for the same reason, with margins versus cash costs growing to over $700 an ounce in the second quarter.
In adherence to the guidelines of the Central Bank Gold Agreement of Europe, in addition to Switzerland and Sweden, central banks in the region will stop selling gold reserves.
That will put an end to over ten years of selling the gold by the banks.
The CBGA puts a cap on collective sales by the banks.
This could provide even more support to gold, which already enjoys strong support, and is another piece of the underlying fundamentals which are driving gold prices up, taking supply out of the gold market.
Although there will probably be some instances of relatively small sales, expectations are the central banks will follow the overall Central Bank Gold Agreement they made.
Sales from the banks have already plummeted over the last CBGA year, dropping 96 percent to 6.2 tons.
If you look at a chart of Newmont Mining's (NYSE:NEM) performance over the last five years, you find it less than inspiring, as until this summer, it hadn't reached the levels it has in the early part of 2006, when it hit $59.87 on January 9.
It took until June of 2010 for the largest U.S. gold miner to reach and surpass those levels, and it looks like they may have finally broken out, closing at $63.40 on Friday, after reaching as high as $65.40 on Wednesday.
With expectations high in the gold mining stocks because of the ongoing gold bull market, the largest gold mining companies have underperformed as the smaller companies have been outperforming them in a major way.
Major gold miners were held back because costs were increasing at approximately the same pace as prices.
Increasing gold prices are finally starting to overcome that, and it looks like Newmont may be in for a nice upward run.
Although Barrick Gold (NYSE:ABX) and Goldcorp (NYSE:GG) have outperformed Newmont over the last five years, over the last two or three years, when gold prices were soaring, they've been mostly flat as well.
Eldorado Gold (NYSE:EGO) received a lot of attention recently when they were named as the fastest growing company in 2010 by Fortune, but growth isn't the only strengh of Eldorado, as their low operational costs puts them in an enviable place.
The two major benefits of any company with low costs advantage are the flexibility it has and the ability to navigate its way through difficult economic times.
In gold mining, and mining in general, that's one of the major differentiators and moats separating the miners as a quality investment.
Even though Eldorado suffered some negative media coverage when they were openly outbid for Andea Resources by Goldcorp (NYSE:GG), all it revealed is what everyone already knew: they aren't able to successfully wage a bidding war against the major miners.
But as Eldorado CEO Paul Wright noted recently, they have two solid in Turkey and China, with another in the permitting stage in Greece. That will keep them busy for several years even if nothing else happens.
Wright wasn't concerned over the major miners' strength to outbid them on companies either, as most the time they don't end up interested in the same assets.
While Wright has said he would be open to another potential acquisition, it would have to be a very opportunistic one. Much of that is related to geographic preferences for the company they want to work in.
In his mind it'll probably be a couple of years before they start looking in the acquisition area again.
Over the long term Wright says he making decisions on the assumption the price of gold will continue rising, and being one of the top low cost miners in the industry, can do well in strong and weak economic environments.
The cash cost for gold production in the latest quarter for Eldorado was $375 an ounce.
Friday, September 24, 2010
There are so many variables, which when combined, provide the perfect storm for gold prices, and at any one time one or the other can be highlighted, continuing to push the price of gold upward.
Today's record gold price, where gold futures traded as high as $1,301.30 an ounce on the COMEX, was moved largely by the weakening U.S. dollar, which has shrunk against the euro (EUR/USD), gaining over 1.3 percent in morning trading.
So far in September gold has gained 4.2 percent, and is up 18.5 percent for 2010.
While $1,300 is not much more than a measuring stick and doesn't mean that much, whenever a new increment of $100 is met it's important psychologically, and reinforces the underlying fundamentals as to why gold continues to soar.
Barrick (NYSE:ABX), Newmont (NYSE:NEM) and Goldcorp (NYSE:GG) Will Move Up as Gold Prices Continue to Soar
A number of gold miners, including giants Barrick Gold Corp. (NYSE:ABX), Newmont Mining Corp. (NYSE:NEM), and Goldcorp Inc. (NYSE:GG) should perform strongly going forward, as valuations are historically cheap, and lag the upward movement of the price of gold.
A growing number of investors are increasingly excited about the possibilities for gold mining companies, as it's inevitable they attract more and more attention, which will increase investment, but could also draw those who don't understand the market. That could lead to a bubble sometime in the future, but it's nowhere near to that place now.
Higher gold prices are creating wider margins, which of course will lead to strong earnings for the gold miners, and the current quarter should be very strong for them.
Valuation for gold mining stocks have plummeted to their lowest levels in about 18 months, creating the powerful argument for a surge in the price of the gold mining sector.
The more important long term outlook is the underlying fundamentals, including inflation, weak economy, deficits and out-of-control government spending.
That isn't going to change any time in the near future, and the gold miners and investors in them will benefit as a result.
Some think it could be up to three years before investing in gold and gold stocks go mainstream, and that's a lot of time to make money before irrational investors enter the sector, if that proves to be the case.
Thursday, September 23, 2010
JPMorgan (NYSE:JPM) has now opened its gold storage facility in Singapore, which will also store other metals as well.
Tim Wilson, JPMorgan's head of Asia marketing of global commodities said, "We've seen increasing appetite from investors and clients to diversify the location of their gold holdings and our vault facility provides an alternative site to places such as London, New York and Zurich."
"This is a significant step for us to have a direct exposure to the physical gold market in Asia," added Wilson.
Along with other metals, the storage facility will also store resources for exchange-traded funds.
The facility is located in the free trade zone at the Changi international airport.
Along with the physical settlement of transactions of JPMorgan, the facility will be available for settlement of Singapore Mercantile Exchange gold futures contracts as well.
Wednesday, September 22, 2010
Eldorado Gold (NYSE:EGO) has suffered some unexpected backlash when they were suddenly outbid by Goldcorp (NYSE:GG) for Andean Resources (TSE:AND).
Most of the fallout from the lost bid is in the rumor mill, more than anything else, and it didn't help that they were named the fastest-growing company by Fortune, when that isn't the case.
That invited intense scrutiny, which combined with the rumors, has seemed to hold the share price of the company down.
After the failed bid, the market was looking for Eldorado to attempt to snatch up other companies, which didn't work out, and they're pointing to organic growth instead rather than acquisitions going forward.
That created the problem of higher expectations in the market place, which, again, is holding down share price.
While open to the right acquisitions, the loss of the bid to Goldcorp showed the lack of financial power to make a good deal. CEO Wright sees possible acquisitions in a couple of years, rather than sooner.
That's probably due to the fact there will be consolidation as larger miners grab up the top assets as gold prices surge and the deals make sense.
Eldorado will be left with less desirable assets to look at, but still potentially very profitable ones.
The ultimate backlash in all this is Eldorado was seen as what they are, a smaller player in the big gold pond. That's not necessarily bad, but it is concerning short-term share price, which will have to work its way thorough lowered expectations.
Gold was weak leading up to the Fed meeting on Tuesday, as everyone was waiting to hear if the Federal Reserve was going to announce another round of quantitative easing.
Barrick Gold (NYSE:ABX), Goldcorp (NYSE:GG) and Newmont Mining (NYSE:NEM) almost at the same time of day were down heavily until the meeting ended and they all shot up to close in positive territory.
While the Fed really did nothing, which was good news, they did again give their promise to stimulate the economy if it needs to be.
That was enough to get gold moving up again, as it broke another record Tuesday, closing at $1,289, after surging $13 to reach $1,291.
Along with the promise to "stimulate" the economy if it needs it, the Fed also said how weak it still was, mirroring what we all knew, even with the ignorant announcement yesterday (not by the Fed) the recession has been over for over a year.
There wasn't enough to necessarily push gold prices up quickly, although we'll see today, but there was enough to confirm it's going to be a long haul for gold prices, and that's good news for gold investors.
The news they were going to continue to keep interest rates low was another major factor, which also plays into gold remaining a hot commodity.
Tuesday, September 21, 2010
While we don't need the Federal Reserve to tell us the U.S. economy is weak and anemic, gold investors and others were looking to see what they would say and announce, as it would definitely have a temporary impact at minimum, and a longer term one, depending on what they said.
For once the Federal Reserve said they weren't going to do anything at this time, and would wait to see if the economy could heal itself.
Too bad the schizophrenic central bank doesn't retain that policy. But then again, gold prices wouldn't be doing what they are doing if they didn't interfere.
The conclusion of the Federal Reserve wasn't any different than the last FOMC meeting, and that was they were still concerned about the economy, and stood ready to throw more money at it if they thought is is needed.
Like $1.7 trillion thrown down the hole wasn't enough last time.
If there weren't elections coming in November, the spending-addicted Fed would probably have interfered again, but since the Democrats are already going to get hammered, they didn't have the will to do what their addiction pressures them to do.
But gold prices responded to the comments on the weak economy, and they surged quickly once the news of the contents of the meeting were released.
Because it's nothing new, it's doubtful it'll have any significant effect on gold prices, although it does remind everyone of how bad the U.S economy really is.
Gold in the short term should continue to run up on the fundamentals, and the after the elections we should see an announcement from the Fed that they're ready to implement quantitative easing again, which will cause gold to soar price.
Of course that could happen without that, as many other factors outside the U.S., like growing geopolitical stress in Asia, along with the ongoing sovereign debt debacle in Europe, could push gold prices up quickly if and when any new changes come about, which they are almost sure to.
Harmony Gold Mining Co. (NYSE:HMY) chief executive officer Graham Briggs said gold prices by the end of 2010 could reach as high as $1,500 an ounce.
This comes on the heals of several record-breaking performances by gold, as it soars on continuing concerns over the recession, European sovereign debt and anemic American and European economies.
Other than that, some clowns actually had the guts to declare the recession was over, but not just over now, but over in June 2009.
I guess the rest of us were just too dumb to see that. Glad they told us. We were so foolish to think otherwise.
Briggs added he doesn't see anything in the way to stop the continuing climb of gold anytime soon.
Goldcorp (NYSE:GG), Barrick (NYSE:ABX), Newmont (NYSE:NEM) Gain on Record Gold Prices, Fed Meeting Expectations
Goldcorp (NYSE:GG), Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM) continue to enjoy the record-breaking gold prices which have helped them to climb along with them. That was no different Monday, as gold prices surged to another record, reaching as high as $1,285 an ounce.
Even though all the largest gold miners increased in value, there was still the sense of things being held back in anticipation of the Fed meeting tomorrow, where everyone will be looking for a clue as to whether or not they're going to throw another round of quantitative easing at the market.
Goldcorp was the largest beneficiary of the largest miners mentioned above, closing at $43.70, gaining $1.04, or 2.44 percent.
Barrick Gold closed at $46.45, an increase of $0.46, or 1.00 percent.
Newmont closed at $63.27, a slight upward tick of $0.26, or 0.41 percent.
If quantitative easing is mentioned in today's Fed meeting, all these figures, especially gold futures, should shoot up to much higher levels.
Monday, September 20, 2010
The continual record-breaking performance of gold prices has obscured the smaller cousin of gold - silver, but for the month of September, even with the upward movement of gold, silver has so far outperformed it.
Silver investors have been expecting and waiting for this for some time, as the gold/silver ratio wasn't performing as it has historically, having a much wider spread in the favor of gold than usual.
That is starting to change. At the latter part of August, the ratio for gold and silver futures contracts was 64.34, and at the close on Thursday it stood at 61.22. It had been over 70 for quite some time.
While silver is an industrial metal, it is also considered a place of safety in time of economic trouble, similar to gold. If gold prices continue to soar, or as they do, sometimes investors gravitate toward silver as an alternative.
The gold/silver ratio is expected to continue to shrink for the rest of 2010 and through 2011.
With fundamentals expected to remain in place, Barclays (NYSE:BCS) believes gold will continue to perform strongly in the fourth quarter.
Barclays said “we maintain our view for the fourth quarter of this year to be the strongest quarter on record yet for gold prices, with downside corrections finding support from the seasonally strong period for fabrication demand with the forthcoming wedding and festival season in key gold-consuming countries.”
Several reasons were cited by the financial firm, including expected continuation of quantitative easing, ongoing low interest rates, and gold miners continuing to abandon their hedge books.
Gold broke all-time records several times last week, and some are saying it could hit $1,300 this week if quantitative easing is mentioned by the Federal Reserve.
Gold investors are waiting in anticipation of the Federal Reserve’s Federal Open Market Committee meeting on Tuesday, as any hint there will be quantitative easing will cause the yellow metal to soar.
Citigroup (NYSE:C) has stated if there is a nod in that direction, gold could hit $1,300 this week, let alone by the end of the year, as many analysts and traders have estimated.
The Federal Reserve has a problem, as it probably doesn't want gold to get too big of a push, as it would remind everyone of their failing policies and the over $1 trillion spent which was a complete waste and ineffective.
On the other hand, the Obama administration and the Democrats have a vested interest, as they haven't been able to resist any event which makes them look like they're doing nothing about it.
with elections coming up soon, there could be pressure on the Fed to announce more spending or quantitative easing to make it look like Obama is attacking the continuing weak economy.
Either way, it seems like they will lose, as the majority of Americans are fed up with the out-of-control spending of American politicians and the Obama administration, and so to continue spending in this political environment is political suicide, but that hasn't stopped the majority of Democrats from continue their spending onslaught.
There's really nothing else the Fed can do, or the Obama administration. The question is will they try anyway. If they do, gold will probably skyrocket extremely quickly, if they don't, the liberal base of Obama will more than likely attack him for doing nothing.
Either way, gold will be the benefactor, and even if the term quantitative easing isn't used, or no decision is made, the Fed has already said they're ready to interfere again, so if gold pulls back, it'll only be temporary, as everyone knows they're drunk with spending, and they can't control themselves.
Alamos Gold (TSE:AGI) increased its semi-annual dividend again, bumping it up by 17 percent.
In April the company declared a dividend of 3 cents a share, and it was increased to 3.5 cents a share now.
CFO John Morda said in a statement, "This dividend increase reflects our balance sheet strength, increased realised gold sale prices, and our continued ability to generate strong cash flows from operations.”
Gold production for Alamos comes from its Mulatos mine, in Mexico. They also acquired Agi Dagi and Kirazli, both located in Turkey earlier in the year from Teck Resources (NYSE:TCK) and Fronteer Development Group (AMEX:FRG).
Speaking at a CLSA Investors’ Forum 2010 in Hong Kong recently, Marc Faber said he still sees gold prices as relatively inexpensive, even though record prices continue to be set.
Faber gave his reasoning as this, “Given all the unfunded liabilities and the money printing in the world and the size of the financial assets in the world, I don’t think we are in a bubble.”
He's definitely right. At this time these elements aren't close to being fully priced into the value of gold, and central banks and governments are drunk on spending and reckless in stimulus, as they're caught in their socialist schemes which can't be paid for.
Even though he still considers gold to be cheap, Faber does recommend a monthly investment rather than attempting to time the market or putting everything in at once.
He also suggests gold will go through some significant price swings and corrections while maintaining its upward climb. That means those with large, one-time investments could get slammed if their entry point is on the high end.
Bottom line is governments aren't going to quit attempting to pay for their socialist programs, and that guarantees quantitative easing and stimulus, along with the accompanying increase in gold prices.
Citigroup (NYSE:C) said last week if we hear the phrase "quantitative easing" used by the Federal Reserve this week, we'll probably see gold prices soar to record levels above $1,300.
Investors are strongly tuned into gold now, especially in light of the ongoing disaster with the European sovereign debt crisis and weak U.S. economy.
Ben Bernanke has already stated he's ready to intervene and resume quantitative easing if the economy goes south. And since it has, there are sure to be at minimum rumblings, and possibly guidance, as to what the central bank is planning.
It seems if there is any type of specifics mentioned in that regard, gold prices will probably soar past the $1,300 mark this week. We'll see if the Fed has the guts to say it at this time.
Friday, September 17, 2010
Citigroup recently said they see the price of gold possibly reaching $1,300 an ounce as early as next week, depending on whether or not the Federal Reserve talks about quantitative easing.
Goldman Sachs (NYSE:GS) now agrees that their estimates on how long it'll take to reach $1,300 gold could come much quicker if quantitative easing is resumed.
In a note to clients, Goldman analysts said quantitative easing "would likely accelerate the move to our 6-month price target and provide upside risk to our forecast."
Gold prices broke another record in intraday trading Friday, reaching $1,284.40 an ounce for December delivery.
Gold prices today surged to another record, as mixed economic data, European sovereign debt, and probably most importantly, fears over a return to quantitative easing by the Federal Reserve, continue to drive the gold price up.
In the middle of the trading session gold futures December delivery moved as high as $1,284.40 an ounce, surpassing the previous intraday record of $1,279.50 an ounce and the record close of $1,273.80 an ounce, both of which happened on Thursday.
While much of this is credited to the lack of governments around the world being able to do anything about it, it's also increasingly related to the fact that a growing number of people believe governments should quit interfering with economies and let the free market sort it out.
With the November meeting of the Federal Open Market Committee expected to result in some comment on quantitative easing, investors are flooding to gold, as each time the idea is put forth, gold prices are strengthened, as when actions are taken it'll continue to debase currencies around the world, especially the U.S. dollar.
The president and CEO of Allied Nevada Gold Corp. (NYSE:ANV), Scott Andrew, sold 5,00 shares he held in the company for an average price of $26.21. He sold the shares on September 15, 2010.
Interestingly, institutional investors have been plowing investment into the gold miner, increasing the amount of shares owned from 69,878,861 shares to 83,606,659 shares over the last three months. That's just under a 20 percent increase.
Altogether, institutions now own over 94 percent of the company.
Institutional investors in Allied Gold include Chuck Royce of Royce & Associates, Steven Cohen of SAC Capital Advisors, and George Soros of Soros Fund Management LLC.
Now that summer is gone, a typically slow season for gold, Jefferies & Co. said the fall factor is playing a factor in the increase in gold prices, and they like gold mining giant Barrick Gold (NYSE:ABX) in the sector.
"The combination of monetary, supply demand, and technical drivers should allow gold and silver prices to achieve higher highs and greater lows over next 12-18 months. As investors discount a higher gold and silver price, we expect precious metal-related equities to better reflect improved price realizations and scarcity value," said Jefferies in a note to clients.
Barrick was at $46.10, gaining $0.20, or 0.44 percent as of 11:23 AM EDT.
Thursday, September 16, 2010
Eldorado Gold Corporation (NYSE:EGO) announced they have closed the acquisition of the Xiaoshiren Central exploration license, located about 20 kilometers southeast of their White Mountain gold mine in Jilin Province, China.
The Xiaoshiren Central EL was acquired from Fushun Hanking Mining Ltd, and is now 100 percent owned by the White Mountain Joint Venture, of which Eldorado holds a 95 percent stake, according to Eldorado President and Chief Executive Officer, Paul N. Wright.
Wright said in a press release, "The acquisition is consistent with Eldorado's China growth strategy where we leverage the advantage of local knowledge and infrastructure to acquire high quality prospect opportunities. Our team continues to review other opportunities and we are confident we will continue to grow and add to our exploration portfolio."
With one caveat, Citigroup (NYSE:C) says within a week we could see gold hit $1,300, and the caveat is if the Federal Reserve in the U.S. announces they're going to implement quantitative easing again.
If that happens, all bets are off as to how high gold prices could go, as gold prices today broke another all-time record, and that will continue to happen on a consistent basis.
The reason this will happen is the U.S. government and Federal Reserve through all that they had with the over $1 trillion already spend in an attempt to battle the recession. It didn't work. They have nothing left to throw at it be more money, which will result in the price of gold continuing to skyrocket.
Repercussions from the original stimulus spending are starting to be felt, as the core Producer Price Index in the U.S. increased 0.4 percent in August, part of the reason for the surge in gold prices today.
The U.S. government and Federal Reserve are drunk with spending, and like an unrepentant wino, think another drink won't hurt them.
Even some of advocates of the first Obama stimulus, like Alan Greenspan, are calling for the government and central bank to stop the madness and let the market heal itself; something that should have been done in the first place.
They won't, as they think one more drink, or spending spree, won't hurt them. This is why we can be confident going forward gold prices aren't going to go anywhere but up. Nightcap anyone?
Ivanhoe (NYSE:IVN) Slaps Down "False and Misleading" Information from 'Business Spectator' and 'The Australian'
Ivanhoe Mines (NYSE:IVN) noted in a press release that recent information published on the 'Business Spectator' website and in 'The Australian' newspaper contained "false and misleading information" about the mining company.
Concerning the numbers, some of the assertions made which Ivanhoe refutes, includes the costs of the Oyu Tolgoi copper-gold project in Mongolia, which was said to be $4 billion, but is in fact $4.6 billion, according to Ivanhoe. Those numbers include $1 billion to be invested on part of the "phase-two development of the planned underground mine."
Another bit of wrong data is that their partner Rio Tinto (NYSE:RTP) can only acquire a 44 percent stake in Ivanhoe. The percentage is actually higher than that, up to as much as 46.65 percent.
One more serious allegation made against Ivanhoe was they have underestimated the capital costs of the mine, which the miner countered was untrue, and the project's major contracts remain within budget and ahead of schedule.
Full press release
Wednesday, September 15, 2010
George Soros seems to be clueless on gold and his obsession with it being the "ultimate bubble."
Soros doesn't seem to understand the reason there's support under gold and why that will continue for a long time.
He said to Reuters, “I called gold the ultimate bubble which means it may go higher but it’s certainly not safe and it’s not going to last forever,” although reluctantly admitting it's the only bull market at this time.
One reason Soros asserts this is he's big government socialist, and has out-of-the-mainstream views on politics and life.
Gold interferes with his worldview in that regard, and even though he has millions invested in gold, continues to hammer at it as if it's poised to plunge at any time.
There's no problem with Soros saying gold is an ultimate bubble, as someday in the far future that will eventually play out, especially when investors and the average person on the street all pour their money into it without knowing why, and far past the reason it is going up at this time.
That's the overall practice of fast-moving stocks and bull markets of any kind throughout history.
Where he's completely wrong is in he says gold isn't safe. Gold is safe, but it of course, like anything else, depends on how someone is investing in it, and the degree of overall exposure of their overall portfolio.
The price of gold is going up because of economic weakness and disastrous policies and practices of central banks and governments around the world.
And with the recession continuing on, or at minimum the global economy slowing down significantly, quantitative easing is ready to begin again, which will drive up the price of gold even more.
Of course it's not going to last forever, as Soros says, but that's obvious.
But that's like saying if you live in certain parts of California you're going to experience an earthquake sometime.
Everyone knows that, but you simply need to be prepared for that inevitable moment and respond accordingly. You don't stop living and life because it may happen.
Danger can come anywhere and any time, and safety is always an issue, even when traveling to a neighborhood store.
So to suggest gold isn't safe is like saying living in California isn't safe. What's the point?
As long as the fundamental reasons for the price of gold continuing to rise remain in place, gold prices will continue to rise. It's as simple as that.
when the macroeconomic climate changes, then we all need to remain vigilant with our gold investments.
Gold isn't even close to being in a bubble at this time, as nothing in the global economy has changed to make it be a concern. It will eventually happen, but that is probably a number of years away.
Until governments stop the printing presses and their stimulus plans, gold will continue its upward ride.
AngloGold Ashanti (NYSE:AU) is poised to shut down its hedge book in the early part of 2011, joining other gold miners whose confidence in the support underlying gold prices will continue on for some time into the future.
The giant gold miner will offer convertible notes and common shares as the choices to raise the capital to eliminate their hedging position.
The offering of mandatory convertible notes and equities will be launched at the same time.
Approximately 16 million new ordinary shares will be issued by AngloGold, along with mandatory convertible subordinated bonds, which will be due 2013.
About $1.4 billion will be raised from the sales, which will be used not only to close Anglo's hedge book, but also to fund projects and maintain their balance sheet.
Major competitor Barrick Gold (NYSE:ABX) closed their hedge book about a year ago.
It'll take time to see if the relatively benign economic news concerning the weakness of the European Union is the ultimate catalyst is leveraging gold prices to expected levels, along with the somewhat lagging gold mining stocks like Eldorado Gold Corp Ltd (NYSE:EGO) Yamana Gold, Inc. (NYSE:AUY) and Novagold Resources Inc (AMEX:NG), which soared as gold prices once again surpassed record levels.
Gold miners have responded to soaring gold prices as a mixed bag, which in some cases is justified by the unknown or lack of performance, but in many cases, based on the fundamentals, such as in the case of Yamana Gold, seem to not be able to catch the gold price wave, and has lagged behind some competitors with much less reserves and quality management.
When talking about "benign" economic news, I mean by that that other recent news should have devastated the markets and pushed gold prices and miners higher, like the revelation the stress tests for European banks were pathetic, and the banks were much more exposed to sovereign debt than revealed.
So the idea that Europe isn't as strong economically as thought, is rather weak in comparison to the recent stress test revelation.
I think this is why the price of gold skyrocketed Tuesday, because there is a pent-up realization that the economy and its condition has been covered over by rigged reports and focus on the positive only by the mainstream media, which can't seem to report honestly unless their man Obama and the Democrats are made to look bad.
No matter, the truth is slowly coming out to the general population as to the devastate U.S. economy, and even with reports generated to make it appear confusing and mixed, that is slowly dissipating into an understanding of the danger we're still in, and gold is waiting there for investors to put their money into to protect themselves.
The idea of throwing out more stimulus is a surety now, or at least the attempt to do if, and if that happens, gold will again get a big upward bump as investors seek to protect themselves against a debased currency and out-of-control spending.
Gold miners will take part in the response to this scenario as it continues to play out, and they have, in many cases, a lot of room to run before things level out.
Royal Gold, Inc. (NASDAQ:RGLD), which participated in a nice upward move in share price as gold prices shattered another record, had its board of directors declare a quarterly dividend for the fourth quarter of $0.09 a share.
Shareholders of record at the close of business on October 1, 2010 will have the dividend payable on October 15, 2010
Those holding exchangeable shares of RG Exchangeco will also receive the dividend.
Royal generates revenue from acquiring and managing royalty interests.
The company closed Tuesday at $50.46, gaining $1.86, or 3.83 percent.
Tuesday, September 14, 2010
Goldman Sachs’ (NYSE:GS) economist Jan Hatzius says he sees the Federal Reserve beginning a new round of quantitative easing, and it could happen as early as November, he said.
Quantitative easing is the phrase the Fed hides behind for the printing of money, which our children and grandchildren will have to pay for, if they are even able to.
While the ongoing weak economy, and probably a recession that has never left, continues on (hidden by the printing of money and stimulus programs), gold prices always soar on that news, and it's possible the expectations of quantitative easing also resulted in the record gold prices today.
Hatzius said, “We don’t expect this at the September 21 meeting, but in November or December there’s certainly a possibility that it will be announced.”
The Fed will more than likely acquire about $1 trillion in U.S. Treasurys in their misguided effort to get us out of the recession, which has already failed with the over $1 trillion already spent, and will fail again.
Gold and gold mining companies will only benefit from continued policies of Ben Bernanke's Federal Reserve and the Obama administration.
Rio Tinto (NYSE:RTP) announced Monday it has increased its stake in Ivanhoe Mines to 34.9 percent. That followed a conversion of a matured convertible credit facility by Rio.
That brings the total investment by Rio in Ivanhoe to $1.73 billion. They also have rights to subscribe for common shares in Ivanhoe, which if exercised, would bring the total stake in the company to about 44 percent.
Ivanhoe has control of the extraordinary Oyu Tolgoi copper-gold project in Mongolia, which is among the largest undeveloped mines in the world.
The two companies are partnering to develop the resource, which also includes a stake by the Mongolian government in the deal.
The project is expected to cost about $5 billion to develop.
Ivanhoe has also signed a preliminary agreement valued at up to $1.8 billion with two global financial institution for financing purposes if needed.
The price of gold today exploded to another record high as weak economic news out of Europe reinforced the extremely fragile and weak global economy.
Another factor may have been the weaker U.S. dollar, but the hype of a global recovery after a couple of reports focused on by mainstream media wasn't believed, and the pent-up fears and concerns are pouring out toward gold again; primarily being driven by that.
Gold prices soared to a record high on the New York Mercantile Exchange, reaching $1273.40 on a gain of $25.90 for December delivery.
Most gold miners moved up with the price surge, including majors like Goldcorp (NYSE:GG), Barrick Gold (NYSE:ABX), Newmont Mining (NYSE:NEM) and Kinross Gold (NYSE:KGC).
Even though gold production in the state of Nevada fell for the first time in ten years, the state remains the sixth-largest gold producer in the world, still led by mining giants Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM).
Nevada, which lags behind only China, South Africa, Australia, Russia and Peru in gold production, ended 2009 producing $5.1 billion in gold and silver combined.
Barrick and Newmont also helped push down the cost of production as well for the state, falling from $525 an ounce in 2008 to $508 an ounce in 2009.
The amount of ounces produced in 2009 was 5.64 million, according to the Natural Resource Industry Institute at the University of Nevada, Reno, economist John Dobra.
Only one downside has been found in Nevada gold production, and that was the amount going into exploration, which fell from $158 million in 2008 to $110 million in 2009.
Most of that is attributed to tight credit markets rather than lack of opportunity and interest.
Dobra concluded concerning provable and probable reserves, that even if all the gold in Nevada has been discovered, they could continue mining at current levels until at least 2023.
But even with less exploration, a number of new deposits have been found, and the future continues to look bright for Nevada gold mining and the companies who have a large stake in the state.
In case it ever does slow down, gold producers in Nevada have been keeping their richest deposits on hold for times when that may be all they have to produce. It's unlikely they'll have to employ that strategy for decades to come.
Although the first lead and zinc concentrates were produced by Goldcorp (NYSE:GG) at their Penasquito project in Mexico in 2009, the company decided to wait until the second 50 000-t/d mill and flotation line was operational before making the declaration it had officially hit commercial production, which they now have done.
Goldcorp is on track to finish construction on high-pressure grinding roll circuit in October, which will produce 30,000 tons a day, which will reach as high as 130,000 tons a day in early part of 2011.
The company's estimate of 180,000 ounces of production from the project remains in place for 2010.
COO Steve Reid said, “Peñasquito has achieved every significant operational milestone on schedule, culminating in today’s declaration of commercial production.”
The Penasquito project, which is estimated to have a 23-year lifespan, should produce 500,000 ounces of gold, 28 million ounces of silver, 450 million pounds of zinc, and 200 million pounds of lead on an annual basis.
Monday, September 13, 2010
Renaissance Minerals (ASX:RNS) announced they have made a deal to acquire the Pinjin gold project in Western Australia from US-based gold mining giant Newmont Mining (NYSE:NEM).
Renaissance said in a statement, "The board of Renaissance is extremely pleased to have reached agreement to acquire this highly prospective ground and looks forward to shortly announcing the commencement of drilling to follow up on Newmont's initial success."
"The board also welcomes Newmont as a shareholder of Renaissance."
Terms of the deal are upfront cash of $200,000, and an issuance of 1.5 million shares of Renaissance to Newmont.
Based on resource definition, Ranaissance will also pay two separate cash payments of $1 million each when milestones are met.
Agnico-Eagle Mines (NYSE:AEM) had its price target raised by Credit Suisse (NYSE:CS), increasing it to $79. Agnico was up to $64.74, gaining gaining $0.03, or 0.05 percent, at 3:21 PM EDT.
Credit Suisse had a price target of $75 a share on the gold miner before their increase.
In a note to clients, Credit Suisse said, "On Sept. 8, 2010, AEM provided an update on its 2010 exploration program. Our target price of $79.00/sh has been revised upwards from $75.00 based on increase to our DCF to $52.54 a share from $49.81 a share previously. The DCF revision results from additional ounces mined in our model. We apply a target P/NAV multiple of 1.5 times our DCF. We have revised our 2010 EPS upward to $1.46 from $1.40 as a result of marking to market our commodity prices, partially offset by an increase in exploration expense. Our 2011 and 2012 EPS were revised to $1.69 and $2.64 from $1.79 and $2.72 based on higher exploration expense."
Credit Suisse said AEM has been held back by the ignoring of its exploration over the past 18 months, saying start-up issues have for the most part now been taken care of.
Once investors realize that they see the share price rising to the estimated level.
After completion of an initial evaluation of its La Escondida Project in Sonora State, Mexico, Gold American Mining Corp's (OTC:SILA) Board of Directors gave the go ahead to proceed in the first phase of the field operations.
The initial stage will entail detailed sampling within the mineralized zones, mapping, and a structural evaluation of the area.
Depending on the results of the sampling, Gold American will at that time make a determination as to whether to go forward to the second phase, which would involve a comprehensive geophysics study of the property.
Gold American focuses primarily on acquisition, exploration, and development of silver and gold resources, although it engages other minerals as well on a smaller basis.
Yamana Gold (NYSE:AUY) continues to be the gold mining stock that could and should, but doesn't.
Investors have lost interest in Yamana when it started to downwardly revise production targets, and while recovering some, it still remains flat, and seemingly undervalued.
If you acquired shares in Yamana in November of 2008, you would be happy, as it had dropped to $3.60, and closed Friday at $10.14. But if you would have bought it in November of 2006, you would have taken a loss after holding it for four years.
Considering the amount of proven resources in the ground, it remains puzzling as to why Yamana doesn't have a higher valuation or amount of investor interest.
Taking into consideration the price of gold alone, and not their copper resources, this stock should be much higher.
It could be that gold investors consider other mining stocks as better positioned to take advantage of rising gold prices.
Either way, Yamana is definitely worth watching and investigating further, as the share price should catch up with its resources sooner or later.
Great Basin Gold (AMEX:GBG) has implemented a new IT network from Cisco (Nasdaq:CSCO) to aid them in meeting standards set by Sarbanes-Oxley.
Installing and fine-tuning the system to customize it for Great Basin Gold was Datacentrix, which provided the equipment and provided the initial network design.
Great Basin Sandton network administrator, Arnold de Bruin, said, "The network design phase took two weeks and the required Cisco networking equipment was imported from the distribution centre in Belgium. We are audited twice a year for Sarbanes-Oxley compliance and it is a complex process that needs to take place in a streamlined but highly secure environment.
"The end result is a solution that provides a full audit trail of the business in the form of logs that can be extracted from the Cisco system. It is impossible to alter or manipulate the transaction logs, offering GBG solid protection and ensuring compliance," added de Bruin.
With Great Basin about to have its second mining project commissioned later this year, the Burnstone gold mine, investors have been taking a close look with increased interest, as historically this has been a profitable time to buy miners, when they start production for the first time with a mine.
Estimated annual production is 250,000 ounces of gold, with a mine life of 19 years projected. GBG also has a major gold mine in Nevada named Hollister.
Friday, September 10, 2010
Gold has taken a little bit of a hit this week, as investors ignored the bad economic news and latched onto the good.
That's highly unlikely to continue for long, as the weakness in the global and U.S. economy isn't going to improve any time soon, and mounting evidence confirms we're in for a continuing recession.
Gold prices will respond accordingly and continue their upward push to who knows where, as central banks' and government policies around the world continue to debase currencies and have done nothing to make a difference economically.
As predicted by us here and a number of others, government spending exasperates the problem, it doesn't help it. And gold and gold investors will be the beneficiaries of this folly for years into the future.
In the short term, gold prices could possibly drop, maybe to $1,245, but the support is so strong, that even if it goes below that it's unlikely it'll stay there long.
The revelation, which many of us already knew, that European banks and the stress tests related to them were a joke, and the depth of the sovereign debt risk is probably even worse than we know.
Picking and choosing what economic date we want to focus on isn't a good way to get a good overall picture of what is really happening, and gold investors aren't usually the type to do that, at least those that follow gold throughout the years.
So gold will continue on its upward run, and the economic data, if it can be trusted, will support the fact the global economy is still struggling, and the recession has never really ended. It was just masked by the trillions countries through at it.
That's all good news for gold investors.
Novagold (AMEX:NG) has a lot going for it from several angles, including the undeveloped resources they own, partners, and major investors.
As far as resources go, especially gold and copper, they hold some of the largest undeveloped deposits among miners. They also enjoy deposits of numerous other metals like silver and zinc.
Expectations are the cost to develop the assets will be about $4 billion. Factoring that in the stock could still easily be valued at double the close of $7.47 it was at close Thursday in New York.
For partners, they have mining giants Barrick Gold (NYSE:ABX) and Teck Resources (NYSE:TCK), both quality companies.
They also have investors like George Soros and John Paulson putting millions into the company via their hedge funds. Paulson has raised his stake NovaGold to 9.1 percent, according to his last filing.
With guaranteed deposits, and metals prices, in most cases, especially gold, sure to increase going forward, the major question becomes their ability to control costs while raising capital and expanding production.
If they are able to do that, this stock could run for some time, and go far beyond the mid-teens that some think it is really worth now.
In a webcast covering the UBS Best of the Americas conference, Barrick Gold (NYSE:ABX) CFO Jamie Sokalsky said the company has an annual gold production target of 9 million ounces within five years.
A two-part strategy to reach that level will be implemented. They will continue to work on expanding existing projects, while developing new projects they already have a stake in. That combination should bring the desired gold production results Barrick is looking for.
At this time they're not thinking in terms of acquiring new projects, as the high price of gold has caused the cost of gold assets to soar.
This year Barrick estimates production will be about 8 million ounces of gold on the higher end, but could come in as low as 7.6 million as well.
The gold miner has been battling to reverse their gold production slide, which last year plummeted to 7.4 million ounces.
Projects targeted for expansion or development, include Turquoise Ridge in Nevada, which they own a 75 percent stake in with Newmont Mining (NYSE:NEM). At this time the underground mine is producing between 150,000 to 200,000 ounces a year.
Scheduled to begin production in the fourth quarter of 2011 is the Pueblo Viejo project. In 2013 the Pascua Lama mine will start production. Cerro Casale, in Chile, is also included in the projected 9 million ounce production goal of Barrick.
JP Morgan (NYSE:JPM) analyst Steve Shepherd has upgraded Harmony Gold Mining Ltd. (NYSE:HMY) from "Neutral" to "Overweight."
Shepherd also has a price target over the next 12 months of 102 rand a share.
In the last five trading days, Harmony has made a nice move, closing Thursday at $10.88, gaining $0.14, or 1.30 percent.
Trading volume was near the 3-month average.
Thursday, September 9, 2010
An updated scoping study of the Hycroft mine of Allied Nevada (NYSE:ANV) found it can support a much larger production facility than the original study indicated.
CEO Scott Caldwell said, "This mine is expected to support an operation with a much greater production profile than was originally presented in the April scoping study."
Allied said in August it had a measured and indicated resource of eight million ounces of gold and 259.2 million ounces of silver at Hycroft mine.
Annually the gold miner projects gold production of 610,000 ounces, and silver production of 27 million ounces.
The enlarged project will now cost Allied about $1.1 billion.
They should be able to generate $500 million of that on their own by 2015, with the remaining $600 million to be raised.
In what appears to be a move to increase gold and uranium production at lower costs, AngloGold Ashanti (NYSE:AU) will reportedly work on expanding its existing mines in South Africa.
AngloGold is also investing in large projects in other places, making it important to attempt to tap into existing resources in hopes of keeping minimum annual gold production at about 1.75 million ounces over the next five years, according to executive vice president for South Africa, Robbie Lazare.
The company did say it'll be difficult to accomplish because of the major projects, which over the next decade or so will increase production for the giant gold miner.
Also benefiting in the short term will be its uranium assets, which AngloGold said will increase from 1.3 million pounds to 2 million pounds in annual production.
With demand for uranium ready to explode, that should be a solid benefit for the miner. About 1.4 million pounds of uranium is expected to be produced this year.
Andean Resources (TSE:AND) fell back to earth some on the news Eldorado Gold (NYSE:EGO) wouldn't be making a counter offer to Goldcorp's (NYSE:GG) bid.
The gold miner closed in Toronto at $6.17, dropping $0.22, or 3.44 percent.
There have been no hints or overtures from other companies showing interest in Andean, so Goldcorp should get it unless a suitor emerges at a later date.
Few parties of interest could get into a bidding war with Goldcorp, leaving a relatively small number of potential rivals.
Goldcorp made a $3.6 billion bid last week, beating out the Eldorado bid.
Canaccord Genuity said it is maintaining its "Buy" rating on Kinross Gold (NYSE:KGC), while raising their price target to $24.50.
"Raising our rating and PT based on additional information provided regarding Kinross’ preliminary development plans and view of the conceptual resource potential at Tasiast. Our updated analysis indicates that the Red Back acquisition is likely to be accretive to our valuation," said Canaccord's analyst.
Questions have been raised in some quarters on whether or not the resources "hidden" in Tasiast are as deep as asserted.
If not, it is thought Kinross will only break even on the deal at the price they bid for Red Back Mining (TSE:RBI).
Wednesday, September 8, 2010
Iamgold (NYSE:IAG) announced it has chosen former executive vice president for gas transportation and international at Enbridge Inc.(TSE:ENB), Stephen Letwin, to take over the reins of the company.
Iamgold chairman William Pugliese said, "Steve brings a proven track record in both operations and acquisitions in a highly competitive sector of the resources industry.
"I am confident he will deliver superior returns to our stakeholders.”
Letwin is replacing interim CEO Peter Jones, who stepped in after the sudden and surprising departure of Joseph Conway, who had led the company for seven years.
Letwin will step into the role on November 1. He will also take on the position of president for Iamgold.
With the vote on whether or not Kinross Gold Corp. (NYSE:KGC) shareholders will give the go ahead for the proposed $6.6 billion acquisition of Red Back Mining Inc. (TSE:RBI), coming up, the focus is on the Tasiast mine, which will be the key to a successful transaction.
Kinross Gold Corp. Chief Executive Officer Tye Burt has been out stumping for the deal to go through, saying the analysts’ estimates for the Tasiast mine are far short of the reality.
Burt said this in an interview, “We put out numbers yesterday that would guide the Street to significantly higher numbers, some six times the throughput that’s currently being done at that mine.”
Not everyone is convinced though, as investor advisement firm RiskMetrics Group Inc. recommended to Kinross shareholders that they should vote against the deal.
RiskMetrics said the gold production at Tasiast would have to be “significantly higher” to bring the project to a point of breaking even.
Burt sees no problem with the deal going forward, and hasn't heard shareholders express opposition to the deal.
UBS (NYSE:UBS) kept its "Buy" rating on Goldcorp (NYSE:GG), but raised its price target on the company to $56 a share, an increase of $2.50, on the assumption they'll end up with Andean Resources (TSE:AND).
In a note to clients, UBS said, "We estimate that with its free cash flow under UBS assumptions and proceeds from recent asset sales, Goldcorp can easily fund the Andean transaction and the capital expenditures required for Cerro Negro without any impact on the funding for its current project pipeline."
It is believed that Cerro Negro's reserves are double what they're estimated at now, and that will add to the size of Goldcorp, even as large as it is.
"We believe there is a good opportunity to increase both Cerro Negro's reserves and its production profile. We are assuming both a doubling of production and reserves/resources and an increase in capital expenditures in our estimates. Based on these assumptions, our NAV per share for Goldcorp increases from $35.18 to $36.54," added UBS.
"Applying a P/NAV multiple of 1.55x to the gold component of our gold NAV of $35.76/share (using US$1250/oz gold) and adding non-gold assets of $0.78/share, we derive our target of $56. Based on the implied return, we maintain our Buy rating."
As usual, there have been rumors of other bidders, but there are few in the industry that could compete head-to-head with Goldcorp, and if they did, the value of Cerro Negro could be diluted to the point of irrelevance.
So the thought is more than likely Goldcorp will get the company without another bid.
Eldorado Gold Corp. (NYSE:EGO) announced it has officially dropped its bid for Andean Resources (TSE:AND), after Goldcorp (NYSE:GG) submitted a higher bid of $3.4 billion for the company.
Chief Executive Officer Paul Wright said, referring to losing value in a bidding war, “The gold industry, as a whole, has an appalling track record of value destruction and Eldorado has no intention of following in these unfortunate footsteps.”
Shareholders of Eldorado agreed with him according to Wright, who added they “expressed a note of caution in terms of Eldorado entering a value-destroying auction whose main result will be the enrichment of short-term market participants.”
The other side of the situation is it would have been a waste of time for Eldorado, who didn't have the resources at its disposal Goldcorp has.
The gold miner concluded in a statement that the Cerro Negro mining project, which is the reason behind the bidding for Andean, was a good asset, but not a must-have asset.
We've talked about it quite a few times on Everything Gold that the so-called stress tests on banks in Europe were a joke, and the idea that the European sovereign debt crisis had been avoided on that and the selling of some bonds to the private sector was so ludicrous as to not be taken seriously by anyone that has the least bit of understanding of economics.
The record-breaking close of gold today underscores the reality that investors know the shenanigans going on in Europe, and are ready at the drop of a hat to plow their money back into gold as the reality of the ongoing recession continues to play itself out.
A number of commentators, including us, said from the beginning of the stress tests that something smelled, and they were far from being tough in any way. That has proven to be true already, and we'll see all this unravel before our eyes again.
It'll be interesting to see what games and gimmicks are employed by governments as the truth gets out to the general public.
As far as the record price of gold, for December delivery it closed at $1,259.30, a gain of $8.20, on the Comex division of the New York Mercantile Exchange.
According to the Wall Street Journal, a total of 91 banks purposely used lenient and slack parameters when they performed the stress tests, again though, something that was talked about when they were first performed.
What they did was hide the actual exposure they had to sovereign debt, giving the appearance of health and solvency.
This is why gold prices have continued to have support, even when it appeared there were some economic strength emerging. We knew the data were being cooked, along with the books, and it was only a matter of time before that was revealed to be what it was.
And if the anchor nation of the European Union, Germany, must raise about $135 billion for its 10 largest banks, where does that leave the rest of Europe? I think we all know the answer to that.
The ongoing disaster of the U.S. economy also offers another reason gold will have solid growth for some time to come.
There will be some global economic growth, assuming China and India can bear their part, but even there questions are emerging as to how much they can carry the global economy, as America will no longer be a player in that regard for some time to come, as consumers continue to pay down debt and increase their savings.
Tuesday, September 7, 2010
Credit Suisse (NYSE:CS) downgraded Eldorado Gold (NYSE:EGO) from "Outperform" to "Neutral," with a price target of $23 on them.
Even the soaring gold prices today weren't able to lift Eldorado up, as they've been flirting around the level mark, moving slightly down and up throughout the trading session.
As of 1:46 PM EDT, Eldorado Gold (NYSE:EGO) was at $19.06 a share, losing $0.04, or 0.21 percent.
Downward pressure is on the stock since they lost the anticipated takeover bid for Andean Resources (TSE:AND) to Goldcorp (NYSE:GG).
Newmont Mining Corporation (NYSE:NEM), Novagold Resources Inc (AMEX:NG)
and Yamana Gold, Inc. (NYSE:AUY) are all up today as the news the stress tests for banks in the EU weren't as accurate or reliable as portrayed, has gold prices soaring today, surpassing record levels in mid-day trading, reaching as high as $1,261.60 for December delivery.
It was highly suspect when the stress tests were performed, as many noted at the time they didn't seem to have strong controls in place to give a reliable record of the condition of the banks. Now it seems the European banks hold far more government debt than originally believed.
This renews the specter of an ongoing recession, which we at Everything Gold have never believed left in the first place.
The sovereign debt crisis confirms that belief, among a number of other things, and that will be a strong positive for gold prices and gold miners going forward, as we can see today.
Gold prices today have soared on the news the so-called stress tests of the European banks probably didn't accurately portray the level of government debt they held.
In mid-day, gold for December delivery increased to $1,261.60. If it were to close at those levels, it would surpass the record high of $1,258.30 an ounce, set on the Comex division of the New York Mercantile Exchange in June, which was also the result of the ongoing sovereign debt crisis in Europe.
Gold prices have leveled as the trading session advanced, with spot gold standing at $1,256.80 an ounce as of 1:00 PM EDT, gaining $10.20.
Even if it gold prices don't reach record levels today, one more bit of news like this, or more accurate data as to the real level of the sovereign debt crisis, should push it up and beyond the former record.
Speculation and rumors are swirling around the bid by Goldcorp (NYSE:GG) for Andean (TSE:AND), where names like the original suitor, Eldorado Gold (NYSE:EGO) has been thrown around, with additional gold miners like Kinross (NYSE:KGC) and Barrick Gold (NYSE:ABX) also being offered as potential candidates to launch a bidding war.
Since Kinross isn't that much larger than Eldorado Gold, it probably couldn't be considered a serious contender for the potential bidding war, as their market cap is a little over $12 billion, while Eldorado's is about closer to $10 billion.
Goldcorp has a market cap of about $32 billion, making it pretty much impossible to compete in a bidding war with the by Eldorado and Kinross.
Barrick could obviously compete, but they haven't shown any interest at this time in Andean, and much of the value of the bid is based on potential rather than proven reserves.
Too high of a bid would make the acquisition more of a trophy than a practical success.
The interest in Andean is based on the possibilities of hidden resources which have yet to be discovered at its Cerro Negro gold project in Argentina.
With that in mind, it would be unusual for a bidding war to ensue based on speculation and theory, rather than proven resources.
It could happen, but it would be somewhat irresponsible on the part of those who may participate in it.
Market timing isn't a good strategy of investors in the best of times, and in volatile times it's even more risky. In the case of Great Basin Gold (AMEX:GBG) though, it could be the perfect time, as they're ready to get both of their mines up and running, and that is usually the most profitable entry point for acquiring shares in a gold miner.
The two mines owned by Great Basin Gold include the Hollister mine in Nevada and the Burnstone mine in South Africa.
When the two mines are at full production, the Hollister mine will produce about 120,000 ounces of gold equivalents a year, while the Burnstone mine will at full production produce about 250,000 ounces of gold a year for Burnstone Mine.
The Burnstone mine is close to coming online, as they've finally connected to the Eskom electrical grid in the early part of August, and production should begin this quarter.
One thing to keep in mind about the South African Burnstone project is there are more risks there than with its Hollister mine from a geopolitical standpoint, and so that has to be watched.
But for now, it looks like a good point of entry for investors who don't mind some risk in the gold sector.
Over the next several years, GMP Securities said they believe Goldcorp (NYSE:GG) will be a nice surprise for investors, saying production growth for gold and other metals will be substantial, outperforming major rivals Barrick Gold (NYSE:ABX) and Newmont Mining (NYSE:NEM).
GMP analysts George Albino and Matthew Sheppard gave the nod toward Goldcorp among the top gold miners "with its locked-in and easily financeable growth."
They balanced that with this: "...in a very strong price environment, however, its strengths become a weakness given its low operating and financial leverage result in the lowest NAV or cash flow leverage to gold."
Barrick, on the other hand, offers value in their opinion, "We believe Barrick offers reasonable value, operating scale and liquidity, but lacks Goldcorp's ability to grow organically," said the analysts.
With Newmont it wasn't a question of performance, but of having come off a strong performance with not much upside for production growth. "Newmont, in part because of its recent outperformance, does not present as compelling a case for investors in our view - its biggest drawback is a challenge in maintaining, let alone, increasing, gold production," said GMP.
Surprisingly, they believe Goldcorp and Barrick are in position to "offer opportunities for strong returns to investors. The relative underperformance of the senior producer has, in our opinion, been overdue leaving potential returns here better than for many of the smaller gold companies."
That's a strong, contrarian statement, as most analysts and commentators like the smaller miners better, and view them as having much better growth potential.
Mongolia is dealing with issues it hasn't had to face in the past, and it is leading to unpredictable situations in regard to mining companies, and Ivanhoe Mines (NYSE:IVN), which has a huge project in Mongolia called Oyu Tolgoi, they'll have to keep a close watch on their investment as the continuing narrative unfolds.
The major problem involves building out their infrastructure needed to make mining in the country feasible. All the mineral resources in the world won't help if there isn't the transport facilities in place to move the ore where it needs to go.
Other factors are geopolitical, with China and Russia attempting to exert great pressure on the land-locked country in order to secure many of the resources for themselves.
Mongolia is also starting to understand the economic situation they're in, and corruption has emerged in some cases where existing laws have been changed on a whim, causing licenses to be revoked, as in the case of subsidiaries of Khan Resources Inc (TSE:KRI).
Ivanhoe shouldn't be affected by the volatility, as it seems Mongolia is focusing on new projects and how to frame their resource policy and strategy.
Those in the middle of securing projects or wanting to in the future, could have a long and uncertain ride until these things are ironed out and a stronger rule of law is enacted.
It's like Mongolia has been unsuspectingly awakened from a long sleep and they're trying to figure out how to use their economically atrophied muscles.
Friday, September 3, 2010
Goldcorp (NYSE:GG) announced it has acquired Andean Resources (TSE:AND), eyeing its Cerro Negro gold project in Argentina.
Cerro Negro has indicated resources of 2.54 million ounces of gold and 23.56 million ounces of silver. Inferred resources are 523,000 ounces of gold and 3.12 million ounces of silver.
The project is wholly owned by Andean, making it even more desirable to Goldcorp.
Goldcorp will pay a 35 percent premium of $3.4 billion for the company, as of closing on Thursday, September 2.
Chuck Jeannes, Goldcorp President and Chief Executive Officer said, "Cerro Negro is a high-grade, near-surface system that is expected to generate significant gold production at low cash operating costs following a relatively short construction period. As well, the potential exists for discoveries of new veins within this large, prospective land position."
The boards of both companies have already unanimously approved the deal, which should close in late 2010 or the early part of 2011.
Teck Resources' (NYSE:TCK) Turkish subsidiary, TMST, which is 60 percent joint venture partner and project operator in with Fronteer Gold (Amex:FRG), has begun a 5,000 meter drill program on the TV Tower Gold Project in Turkey.
The property entails 65 kilometers2 and can be accessed by road.
Fronteer Gold said there is a strong possibility that multiple gold deposits are located within the project.
Highlights from rock-saw channel sampling from four different target areas include:
1.1 grams per ton gold over 113 metres
0.7 g/t gold over 63 metres
0.3 g/t gold over 26.5 metres
0.4 g/t gold over 20 metres with individual grab samples as high as 50.0 g/t gold
Fronteer added in a press release:
"A CDN$1.3 million program, funded 60%/40% by TMST and Fronteer Gold, is planned for 2010 with a focus on initiating Phase 1 drilling on two high-sulphidation gold targets. The program will include an additional 30 line kilometres of IP/Resistivity surveys, and 5,000 meters of drilling with two diamond-core rigs."
Eldorado Gold Corp. has made a $3.2 Billion bid for Andean Resources Ltd. (OTC:ANDPF), a gold mining company based in Australia.
Terms of the transaction would be a straight stock deal for shares from Eldorado.
“The transaction is consistent with Eldorado’s stated strategy of building a geographically diversified, low cost, high growth gold producer,” said Eldorado’s chief executive officer Paul Wright,
Included with Andean will be an asset located in Argentina, which has 2.1 million ounces of gold coming with it.
Eldorado valued each Andean share at C$6.36, offering 0.31 share for each one of Andeans.